In financial accounting, the primary purpose of the income statement is to show the:

• A. Company’s assets, liabilities, and stockholders’ equity at a specific date
• B. Company’s cash receipts and cash payments classified as operating, investing, and financing activities for a period
• C. Changes in stockholders’ equity (including contributions, distributions, and comprehensive income) for a period
• D. Company’s revenues and expenses for a period, resulting in net income or net loss

Answer: (D)

Verified step by step guidance

1. Step 1: Understand the purpose of the income statement in financial accounting. The income statement summarizes a company's financial performance over a specific period, focusing on revenues and expenses.
2. Step 2: Recognize that the income statement reports the company's revenues (inflows from operations) and expenses (outflows or costs incurred) during the period.
3. Step 3: Know that the difference between total revenues and total expenses results in either net income (profit) or net loss (deficit) for the period.
4. Step 4: Differentiate the income statement from other financial statements: the balance sheet shows assets, liabilities, and equity at a point in time; the statement of cash flows shows cash inflows and outflows; and the statement of stockholders' equity shows changes in equity accounts.
5. Step 5: Conclude that the primary purpose of the income statement is to provide information about the company's profitability by reporting revenues and expenses, leading to net income or net loss for the period.